10-QPeriod: Q3 FY2006

COHERENT CORP. Quarterly Report for Q3 Ended Mar 31, 2006

Filed May 10, 2006For Securities:COHR

Summary

II-VI Incorporated (now Coherent Corp.) reported solid performance for the nine months ending March 31, 2006. Revenue increased by 22% year-over-year to $167.6 million, driven by strong demand across its key segments, particularly Infrared Optics and Military Infrared Optics. Net earnings also saw a healthy increase of 15% to $19.4 million. The company's strategic acquisition of Marlow Industries in December 2004 continues to contribute positively, with the Compound Semiconductor Group showing significant revenue growth. Despite some segment-specific headwinds, such as a temporary dip in Near-Infrared Optics revenue due to contract language changes, overall operational improvements, including higher production yields and cost management, bolstered profitability. The company also highlighted its proactive approach to managing market risks, including foreign currency and interest rate exposures. Financially, II-VI Incorporated maintained a strong liquidity position with approximately $24.3 million in cash and cash equivalents and substantial available borrowing capacity. The company's outlook remains positive, with expectations for continued strong bookings and revenue for the remainder of fiscal year 2006.

Key Highlights

  • 1Revenue increased by 22% to $167.6 million for the nine months ended March 31, 2006, compared to the prior year period.
  • 2Net earnings grew by 15% to $19.4 million for the nine months ended March 31, 2006.
  • 3Bookings saw a significant increase of 34% to $183.4 million for the nine months ended March 31, 2006, indicating strong future demand.
  • 4The acquisition of Marlow Industries in December 2004 continues to contribute, with the Compound Semiconductor Group showing substantial revenue growth.
  • 5Operational improvements, including enhanced production yields and cost management, positively impacted segment earnings.
  • 6The company maintained a healthy liquidity position with $24.3 million in cash and cash equivalents and $23.4 million in available borrowing capacity as of March 31, 2006.
  • 7II-VI Incorporated adopted SFAS 123R, recognizing the fair value of stock-based compensation, which impacted reported earnings but is now a standard accounting practice.

Frequently Asked Questions

The primary driver of revenue growth was increased demand across most of the Company's business segments, particularly in the Infrared Optics segment, which benefited from stronger shipments to industrial Original Equipment Manufacturers (OEMs) and aftermarket customers worldwide. Increased manufacturing output by high-power laser manufacturers also fueled demand.

The acquisition of Marlow Industries, which was completed in December 2004, significantly contributed to the Compound Semiconductor Group's revenue growth. While Marlow's product mix historically had lower gross margins, its overall performance improved the segment's earnings compared to the prior year, turning a loss into a profit.

The company expects strong bookings and revenue for the remainder of fiscal year 2006, driven by continued demand in its key segments. The Infrared Optics segment is anticipated to maintain strong booking rates, and the Near-Infrared Optics segment expects to recognize significant revenue from stocked UV filter components in the fourth quarter.

II-VI Incorporated utilizes foreign currency forward exchange contracts, primarily for Japanese Yen, to hedge transactional exposure on export sales. They also hold a Yen-denominated term loan to minimize foreign currency exposure. The company monitors these positions and counterparties' credit ratings.